VMware 2013 Annual Report Download - page 33

Table of Contents
Our certificate of incorporation and the master transaction agreement entered into between us and EMC in connection with our initial public offering
(“IPO”) also contain provisions that require that as long as EMC beneficially owns at least 20% or more of the outstanding shares of our common stock, the
prior affirmative vote or written consent of EMC (or its successor-in-interest) as the holder of the Class B common stock is required (subject in each case to
certain exceptions) in order to authorize us to:
If EMC does not provide any requisite consent allowing us to conduct such activities when requested, we will not be able to conduct such activities and,
as a result, our business and our operating results may be harmed. EMC’
s voting control and its additional rights described above may discourage transactions
involving a change of control of us, including transactions in which holders of our Class A common stock might otherwise receive a premium for their shares
over the then-current market price. EMC is not prohibited from selling a controlling interest in us to a third party and may do so without the approval of the
holders of our Class A common stock and without providing for a purchase of any shares of Class A common stock held by persons other than EMC.
Accordingly, shares of Class A common stock may be worth less than they would be if EMC did not maintain voting control over us or if EMC did not have
the additional rights described above.
In the event EMC is acquired or otherwise undergoes a change of control, any acquirer or successor will be entitled to exercise the voting control and
contractual rights of EMC, and may do so in a manner that could vary significantly from EMC’s historic practice.
By becoming a stockholder in our company, holders of our Class A common stock are deemed to have notice of and have consented to the provisions of
our certificate of incorporation and the master transaction agreement with respect to the limitations that are described above.
Our business and that of EMC overlap, and EMC may compete with us, which could reduce our market share.
EMC and we are both IT infrastructure companies providing products and services related to storage management, back-up, disaster recovery, security,
system management and automation, provisioning and resource management. There can be no assurance that EMC will not engage in increased competition
with us in the future. In addition, the intellectual property agreement that we have entered into with EMC provides EMC the ability to use our source code
and intellectual property, which, subject to limitations, it may use to produce certain products that compete with ours. EMC’s rights in this regard extend to
its majority-owned subsidiaries, which could include joint ventures where EMC holds a majority position and one or more of our competitors hold minority
positions.
EMC could assert control over us in a manner which could impede our growth or our ability to enter new markets or otherwise adversely affect our
business. Further, EMC could utilize its control over us to cause us to take or refrain from taking certain actions, including entering into relationships with
channel, technology and other marketing partners, enforcing our intellectual property rights or pursuing business combinations, other corporate opportunities
or product development initiatives that could adversely affect our competitive position, including our competitive position relative to that of EMC in markets
where we compete with them. In addition, EMC maintains significant partnerships with certain of our competitors, including Microsoft.
EMC
’s competition in certain markets may affect our ability to build and maintain partnerships.
Our existing and potential partner relationships may be affected by our relationship with EMC. We partner with a number of companies that compete
with EMC in certain markets in which EMC participates. EMC’s majority ownership in us might affect our ability to effectively partner with these
companies. These companies may favor our competitors because of our relationship with EMC.
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•
consolidate or merge with any other entity;
•
acquire the stock or assets of another entity in excess of $100 million;
•
issue any stock or securities except to our subsidiaries or pursuant to our employee benefit plans;
•
establish the aggregate annual amount of shares we may issue in equity awards;
•
dissolve, liquidate or wind us up;
•
declare dividends on our stock;
• enter into any exclusive or exclusionary arrangement with a third party involving, in whole or in part, products or services that are similar to EMC’
s;
and
•
amend, terminate or adopt any provision inconsistent with certain provisions of our certificate of incorporation or bylaws.